Iacanga Thermal Power Plant

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The Brazilian company Usina Iacanga de Acucar e Alcool S.A., a subsidiary of Usina Ipiranga de Acucar e Alcool, was granted an authorization to build and operate a sugar-cane-residue fueled power plant located in the states of Sao Paulo (32 MW in total capacity). The 35-year contract was signed with the regulatory agency ANEEL in November 2007. The government periodically runs public bidding for the sale of energy to the country´s distribution companies. The UTE Iacanga won the public bidding that took place in 2007 by offering a tariff of US$ 69.5/MWh (BRL 138.9/MWh), and in 2014, by offering a tariff of US$ 85.9/MWh (BRL 201.9/MWh). The project company signed 15-year power purchase agreements with the several electricity distribution companies. In the first public bidding, UTE Iacanga committed to start supplying to the market in 2010; in the second, the commitment was for January 2019. The first two generating units of the power plant, with 12 MW in capacity, commenced commercial operations in 2010. The investment in these units was estimated at US$ 12 million (BRL 21 million). A second unit, with 20 MW in capacity, required an investment of US$ 4.5 million (BRL 10.6 million) and commenced operations in April 2014. The company was granted the right to take part in the government program called Regime Especial de Incentivos para o Desenvolvimento da Infra-Estrutura (Reidi). Companies selected to take part in this program were given tax cuts in the acquisition of capital equipment and construction material acquired both in the domestic and international markets (this incentive represented a cost reduction of about 9.25%). In addition, the company was allowed to use accelerated depreciation methods of accounting for construction expenditures.